FHA Mortgages

FHA Updates COVID-19 Restoration Loss Mitigation Choices | Weiner Brodsky Kider PC


On July 23, 2021, the FHA released Mortgage Letter 2021-18 (ML 2021-18) amending its COVID-19 loss mitigation guidelines for borrowers with FHA-insured forward mortgages affected by the COVID-19 pandemic. ML 2021-18 primarily introduces a “waterfall” for loss mitigation options for owner-occupied primary residences, including: (1) the standalone COVID-19 recovery subclaim (which replaces the standalone COVID-19 subclaim) and ( 2) the COVID-19 Recovery Modification (which replaces various COVID-19 home retention options). It also includes the COVID-19 recovery non-inmate loan modification (which replaces the COVID-19 non-inmate loan modification) among other changes related to the COVID-19 relief effort. These new options can be offered as soon as operationally possible, but must be used for eligible homeowners no later than 90 days after the date of ML 2021-18 publication. However, the letter makes it clear that it has no impact on the validity dates previously announced for the COVID-19 advance credit change (from the 2021-15 mortgage letter). The letter also provides for circumstances under which mortgage holders will have to re-examine homeowners for the new liquidation opportunities.

As discussed in various previous WBK articles (e.g. on when to review, early loan changes, and options introduced to mitigate losses related to COVID-19), the guidance ML 2021-18 provides is the latest in a series Announcements detailing the loss mitigation options available to FHA borrowers and building on previous guidance on the FHA loss mitigation efforts as a result of the COVID-19 pandemic.